Swanson & Hiller, Inc., purchased a new machine on September1 of the current year at a cost of $130,000. The machine’sestimated useful life at the time of the purchase was five years,and its residual value was $10,000. The company reports on acalendar year basis. Required:
a-1. Prepare a complete depreciation schedule, beginning withthe current year, using the straight-line method. (Assume that thehalf-year convention is used).
a-2. Prepare a complete depreciation schedule, beginning withthe current year, using the 200 percent declining-balance method.(Assume that the half-year convention is used).
a-3. Prepare a complete depreciation schedule, beginning withthe current year, using the 150 percent declining-balance,switching to straight-line when that maximizes the expense. (Assumethat the half-year convention is used).
b. Which of the three methods computed in part a is most commonfor financial reporting purposes?
c. Assume that Swanson & Hiller sells the machine onDecember 31 of the fourth year for $29,500 cash. Compute theresulting gain or loss from this sale under each of thedepreciation methods used in part a.
